Moody's upgrades Global Imaging, rates loan Ba3, convertibles B2

Moody's Investors Service assigned a Ba3 rating to Global Imaging Systems Inc.'s planned senior secured $100 million revolver due 2008 and senior secured $150 million term loan B due 2009 and a B2 rating to its $50 million convertible senior subordinated and upgrade the existing ratings including the senior implied rating to Ba3 from B1 and issuer rating to B1 from B2.

Moody's said the upgrade reflects Global Imaging's improved financial performance, history of deleveraging, cost cutting and efficiency gains.

Specifically, Moody's said the higher ratings are in response to Global Imaging's strong revenue growth since its inception, interest savings as a result of the proposed refinancing and its relatively consistent de-leveraging as evidenced by its improved financial coverage ratios.

The ratings also reflect the company's successful acquisition strategy as evidenced by its ability to improve the operating efficiency of its acquired companies through better inventory management and other synergies. Acquisitions, along with better than expected performance in the middle market, have helped support operating margins during the tough economic climate.

There are risks related to the acquisitions, however. Although Global Imaging Systems has successfully integrated many acquisitions in the past, there is no guarantee that this success will continue to be as impressive, Moody's said. Additionally, acquisitions will likely be less meaningful to total growth unless the company increases the number or size of its acquisitions in pace with its revenue growth. This is because the company's revenues have grown by a 57% compounded rate over the last six years.

Pro forma for the transaction, debt to EBITDA is estimated to be 2.3x while debt to free cash flow stands at 3.4x, Moody's said. Pro forma EBITDA coverage of interest is estimated to be approximately 5x. EBITDA less capital expenditures coverage of interest is approximately 4.8x.

S&P says Global Imaging unchanged

Standard & Poor's said Global Imaging Systems Inc.'s ratings are unchanged including its corporate credit at BB- with a stable outlook in response to new that the company plans to refinance its existing debt, including its senior credit facilities and outstanding senior subordinated notes.

Under the proposed refinancing, total debt will remain essentially unchanged.

However, the refinancing is expected to lower total interest costs, improve EBITDA interest coverage, and moderately extend and smooth debt maturities, S&P said.

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